Former champion jockey Kieren Fallon and two other riders have gone on trial accused of taking part in a conspiracy to fix races. All six defendants deny conspiracy to defraud.

The Old Bailey heard the trio deliberately tried to lose 27 specific races because the prime mover in the conspiracy, South Yorkshire businessman Miles Rodgers, had bet large amounts of money on the internet betting exchange Betfair on them losing.

He told them: "Betfair is one of the leading betting exchanges on the internet. In order to use it and place bets you must first open an account by registering.

Betfair takes millions of pounds of bets every day

"Customers will then be given a username and secure password. You can place bets by telephone but most betting is performed online on the internet.

"You must first deposit sufficient funds to cover the bet or bets that you wish to make.

"Betfair operates in a different way to a traditional bookmaker."

Mr Caplan said the main differences were:

That the customer does not bet directly with Betfair. Betfair is a commission agent which connects gamblers with opposing views on the outcome of a sporting event. It will only accept a bet if it is matched by another customer and it uses technology to match bets instantaneously. If the bet is large then it is likely that it will be matched with multiple counterparties.

That Betfair is a no-risk "bookmaker". It makes a guaranteed profit by taking a commission from the winner's net winnings. The commission varies between 2% and 5%.

That although wagers can be placed on the telephone, most of Betfair's business occurs on the internet. Customers must have sufficient funds to deposit in their account to cover the bet. Usually these are deposited via a credit card.

That with Betfair a customer can "lay" or place a horse as well as back it to win or each way.

That Betfair's odds are decimal (eg 4.1) and not fractions (eg 6-4) so 4.1 means that for every pound staked you receive a return of £4.10 which includes the pound stake. The decimal equivalent, therefore, of 2-1 is 3.0.

That Betfair's market is a free market in that the prices are not controlled by the bookmaker.

Mr Caplan said Mr Rodgers disguised his bets by placing them through a number of accounts which were in the names of friends and relatives, including his girlfriend Joanne Richardson and a man called Darren Armitage, from Barnsley, South Yorkshire.

He said Betfair became suspicious of Mr Rodgers' activities in December 2002.

Mr Rodgers denies both charges against him

Mr Caplan said: "On 30 December 2002 Legal Set was laid heavily. Legal Set was owned by Platinum Racing (a syndicate run by Mr Rodgers)."

He said Betfair began to monitor Ms Richardson's account - called joricho - and became convinced that 11 other accounts were also linked to Mr Rodgers.

Mr Caplan said: "There was technical evidence that bets were being placed on different accounts from the same computer."

Their suspicions were also raised by strange betting patterns, he said.

Mr Caplan said: "The accounts offered odds on lay bets that were significantly higher than elsewhere. This inferred a high degree of confidence in the lay bet.

"For example CD Europe had a starting price of 16-1 yet joricho laid it at 28-1 (ie 29.1). Levitator had an SP of 13-2 yet william4 (Darren Armitage) laid it at 11-1 (12.1)."